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- Unreported Judgment
DISTRICT COURT OF QUEENSLAND
Spiteri & Anor v Jim Chetcuti & Co Pty Ltd & Anor  QDC 021
JIM CHETCUTI & CO PTY LTD
ACN 050 750 395
JAMES GEORGE CHETCUTI
District Court Mackay
15 February 2021
16 June 2020
Moynihan QC, DCJ
The application to set aside default judgment is dismissed
The applicant is to pay the plaintiff’s costs of the application on the standard basis
PROCEDURE – JUDGMENTS AND ORDERS – AMENDING, VARYING AND SETTING ASIDE – where the plaintiffs obtained default judgment against the defendant – where the defendant applied to set aside default judgment under s 290 UCPR – whether discretion should be exercised to set aside judgment – whether defendant has a prima facie defence on the merits
S McLellan for the Plaintiffs
G J Smart for the second Defendant
S.B. Wright & Wright and Condie Solicitors for the Plaintiffs
Wallace & Wallace Lawyers, as town agents for Celtic Legal for the second Defendant
- James George Chetcuti (the applicant) applies under rule 290 of the Uniform Civil Procedure Rules (the UCPR) for an order setting aside the default judgment entered against him.
- The real issue in the application is whether the applicant has a prima facie defence on the merits.
The history of the matter
- On 10 December 2019, the plaintiffs Mr Michael Spiteri (the first plaintiff) and his wife, Ms Margaret Spiteri (the second plaintiff), filed a claim for $197, 334.16 against Jim Chetcuti & Co Pty Ltd (the first defendant) and the applicant (the second defendant) for breach of contract or equitable compensation; and a declaration that the defendants hold all of the property on trust for the plaintiffs. The applicant is the sole director and shareholder of the first defendant. The plaintiffs allege that they invested an amount of money with the defendants in an institutional term deposit and that the defendants have, in breach of the agreement, not repaid the relevant capital amount of $197,334.16 and profit sharing bonuses on 1 June 2018; and that the defendants hold the money and other property on trust for them.
- The claim was served on the first and second defendant on 17 December 2019. The plaintiffs obtained default judgment against the first defendant and the applicant on 14 February 2020. The first defendant was placed into liquidation on 20 February 2020.
- The hearing to assess damages on 27 May 2020 was adjourned. On 1 June 2020, the applicant filed this application.
- The application was listed for hearing on 16 June 2020. At that time the application was part heard and the applicant was granted an adjournment and given leave to file and serve any further material in support of his application by 7 July 2020. The hearing was adjourned to a date to be fixed.
- No further material has been filed by the applicant. On 22 January 2021 the parties notified the Court that they were content for the application to be determined without a further hearing.
The applicant’s primary contention
- The applicant primarily contends that he has a prima facie defence to the plaintiff’s claim. The applicant submitted that “the defence relied on by the applicant is, in short compass, that he did not ever transact with the plaintiffs on his own behalf, but rather only ever as a director of the first defendant.”
- The power to set aside a default judgment is found in rule 290 of the UCPR which provides: “The court may set aside or amend a judgment by default under this division, and any enforcement of it, on terms, including terms about costs and the giving of security, the court considers appropriate.”
- The power to set aside default judgment is discretionary: see Yankee Doodles Pty Ltd v Blemvale Pty Ltd  QSC 134 at . When exercising the discretion the relevant considerations include: whether there is a satisfactory explanation for the defendant’s failure to appear; whether or not the defendant’s delay in making the application preclude it from obtaining relief; and whether the defendant has a prima facie defence on the merits: see National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd  2 Qd R 441 at 449-450; Yankee Doodles Pty Ltd v Blemvale Pty Ltd  QSC 134 at ; Deputy Commissioner of Taxation v Johnston  QSC 061 at .
- In National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd  2 Qd R 441 at 449-450, McPherson J said:
“Speaking generally, it may be said that it is the last of these considerations that is the most cogent. It is not often that a defendant who has an apparently good ground of defence would be refused the opportunity of defending, even though a lengthy interval of time had elapsed provided that no irreparable prejudice is thereby done to the plaintiff”.
- In DCT v Johnston  QSC 061 at , Atkinson J said:
“…the defendant must demonstrate “a very compelling reason” for the failure to appear and that it has a plausible defence either in law or in fact. Before allowing a defendant to come in and defend, the court should have before it material which enables it to say how it came about that the defendant found itself bound by a regularly entered judgment; that the defendant genuinely desires to be allowed to come in and present its case; and that issues are raised in such a form as to require serious consideration of the defence put forward. The affidavit material in support of an application to set aside judgment entered into in default of appearance must set out all the defences on which the defendant intends to rely and briefly set out the facts by which the defendant seeks to establish such defences. A mere statement by the defendant that he or she has a good defence is not sufficient…”
- In order to constitute a prima facie defence, the defendant must demonstrate more than a bare allegation of a defence. The allegation must be supported by some evidence in order to suggest that the defence is plausible and not just raised for the purpose of having the default judgment set aside: see Yankee Doodles Pty Ltd v Blemvale Pty Ltd  QSC 134 at .
The explanation for the failure to appear and delay
- The applicant concedes that the judgment was regularly entered and that there was a delay of approximately three and a half months from when the judgment was entered and this application was made.
- The applicant explains that he failed to file a defence because he was distracted by carrying on his real estate business and the winding up application and eventual liquidation of the first defendant. The explanation for the delay in making this application is that the applicant believed the first defendant “was the only entity which owed the plaintiffs money” and that the claim would not continue against him personally after the liquidation of the first defendant.
- The applicant contends that the delay does not cause any prejudice that an order for costs cannot cure. I accept that.
- However, I am not satisfied that there is a satisfactory explanation for failing to defend and for the delay in bringing this application when the applicant is a mature man, involved in carrying on his own business and was legally represented at all material times. It should be noted that the applicant’s solicitor conceded “the reason for delay… is perhaps not the strongest reason that’s ever been given, but, …. that is not fatal to [this] case”. I would not dismiss the application on this basis alone. The real issue is whether there is a prima facie defence.
A prima facie defence?
- The applicant’s primary contention is that he never dealt with the plaintiffs in his personal capacity, but rather, only in his capacity as director of the first defendant. It was submitted that, in that case, there was no privity of contract or any trust created.
- The applicant must establish a prima facie defence on the merits and demonstrate the evidentiary basis to suggest the defence is plausible.
- I am not satisfied that there is evidence that would suggest a plausible defence and the application is bona fide for the following reasons:
- First, the applicant’s affidavit, oral evidence and draft pleading raises no more than a general bare assertion or allegation that he did not transact with the plaintiffs in his own right. For example, the applicant simply asserts that “at no time have I contracted or agreed with the plaintiffs to accept money from them (or any other investor) to generate financial returns …”; “at no stage have I been in control of the plaintiffs investment in my personal capacity”; and “at no stage have I personally held funds or property on trust on behalf of the plaintiffs”.
- In Embrey v Smart  QCA 75, Applegarth J, when considering whether an affidavit and draft pleading, in combination, amounted to a prima facie defence, observed:
“ The third matter has been described in different ways. Lord Atkin in Evans v Bartlam referred to rules that guide the discretion and one of them was “an affidavit of merits, meaning that the applicant must produce to the Court evidence that he has a prima facie defence”. It has been said that the affidavit “must set out all the defences on which the defendant intends to rely and briefly set out the facts by which the defendant seeks to establish such defences”. The defendant must make more than a bare allegation: the allegation must be supported by “some reference to evidence to suggest that the defence is plausible and not just raised for the purpose of having default judgment set aside”. It is insufficient for an applicant:
“to allege that he has a defence upon the merits and swear to such a defence generally. He must go further and disclose what such merits are, and show to the court that his application is bona fide.”
 The requirement to refer to evidence, not generalities, does not necessarily require a lengthy affidavit of merits. As Prus-Butwilowicz v Moxey illustrates, the contents of a fulsome draft defence may be sworn to by a short affidavit. In that case it was not necessary for the applicant to swear “a long affidavit touching the same matters as appear in his long, detailed pleading”. This case is different. The affidavit does not swear to the truth of the contents of the draft defence and itself swears to matters of defence very generally.” (footnotes omitted)
- Secondly, the current state of the evidence does not support the alleged defence. For example, the applicant gave evidence that the amount invested by the plaintiffs was deposited into the first defendant’s account with AMP. No account records are tendered to establish that. The applicant gave evidence that distributions to the plaintiffs in 2018 referred to shares purchased and held on trust by the first defendant for the plaintiffs. The applicant accepted that it was a “very simple matter” to produce documents showing who purchased and held the shares; and when asked why he did not produce such documents he said “It didn’t dawn on me”. The applicant gave evidence that when the shares were sold in 2019, the proceeds of the sale were paid into the first defendant’s account with the ANZ bank. No documents are produced to support that. Further, the applicant has not produced his own personal bank records to show he never received the money.
- Thirdly, the applicant has made statements to the contrary. In a Report on Company Activities and Property Part A (Form 507) of the first defendant to Australian Securities and Investment Corporation dated 12 April 2020, the applicant, as sole director, said that the company had not traded for six years, did not owe money, goods or services to others, and does not hold property on trust. Further, the first defendant’s assets (including money held in any bank account) were estimated at $4.34. The applicant’s explanation that he did not consider the company to be trading for that period unless it was making a profit and that he believed the first defendant could only hold “real property” on trust strains credulity too far. Mr Bradley Hellen, the Liquidator of the first defendant, in his Notification of Appointment and Statutory Report to Creditors, reported that “[t]he director has advised that the Company ceased trading over 2 years ago. The company ABN was cancelled on 31 March 2014 and it has not been registered for GST since 1 April 2014.” Finally, the applicant accepted that in a telephone conversation with the first plaintiff in 2020 he said he would personally repay all monies owed to the plaintiffs from his superannuation account.
- I am not satisfied that the judgment entered against the applicant should be set aside because:
- (a)there is no satisfactory explanation for the failure to defend and the delay in bringing the application; and/or
- (b)There is no prima facie defence on the merits.
- The application is dismissed.
- The applicant is to pay the plaintiff’s costs of the application on the standard basis.
- Published Case Name:
Spiteri & Anor v Jim Chetcuti & Co Pty Ltd & Anor
- Shortened Case Name:
Spiteri v Jim Chetcuti & Co Pty Ltd
 QDC 21
Moynihan QC DCJ
15 Feb 2021